Thursday, April 30, 2009

A Little Pub

Ben Munoz and I got a little publicity in the Kellogg 07' Class Notes for the patient to patient support networks we started. Scroll down to the bottom in the article for this blurb:

Kellogg grads have been very active in the charitable sector as well. Ben Munoz and Scott Orn launched two Web sites, and, to provide an online community for survivors of Arterio-Venous Malformation and Trigeminal Neuralgia. Ben is a survivor of these neurological disorders and the cause is one that is very important to him. Please help Ben and Scott spread the word about these sites so that others can find the support they need.

The best part of this was finding out that one of my friends, Beth Stevens, aka Gonzo Gal, recommended Ben and me to Ashley Hartmann, the Official Class Notes Aggregator. It's so cool that Beth took the time and it means a lot to me. Thanks Beth!

P.S. If you would like to be involved in the existing networks or starting other networks, drop us a line!

Wednesday, April 29, 2009

Finance Nerd Alert

This is a pretty nerdy post, but I came across some really interesting mortgage stats & trends today. The punch line is we are not out of it yet. The defaults and foreclosures appear to be shifting up market, as in middle & upper middle class are now starting to have problems staying in their houses. The source is Mr. Mortgage, who writes an incredibly insightful blog on, you guessed it, the mortgage market.

This chart shows the situation pretty clearly. If you are into this kind of stuff, definitely read the entire post. The chart shows defaults on loans over $750k and they appear to be accelerating.

Connecting the dots, it seems to me that the mass layoffs are finally starting to hit the middle & upper middle class. After exhausting their savings the last 6 months, these people are finally having a hard time meeting their mortgage payments. Unfortunately there will be a ripple effect towards businesses that depend on discretionary income - restaurants, high-end retailers, etc. Some of this is already going on but it will probably get worse.

For the record, this chart scared the bee-jeezus out of me.

Tuesday, April 28, 2009

Gutting Your Product

The recession is making businesses do crazy things. While making the revenue targets are important, it's just as important to maintain the integrity of your product. Otherwise your product/service dies by a thousand cuts, all in the name of "revenue enhancements." Below is a great example from ESPN has a strangle hold on sports in the U.S. The only thing that could upset their dominance is something self inflicted, something akin to Yahoo mixing in paid search results into natural search results back in the day (that's one of the reasons Google got traction).

Here is a screen shot from the ESPN home page late Monday night.

You can see my little red arrow pointing to the Apple ad on the right. That used to be where the headlines for the day's sports appeared. This is the complete screenshot "above the fold," meaning what the user sees before scrolling down.

Here is the rest of the page, after scrolling down.

The red box contains the headlines. They've been pushed down to below the fold! How can you have headlines that appear below the fold?!?!

It's a great example of degrading your product in search of more revenue. It probably didn't seem like much but it changed my whole user experience and chipped away at my loyalty to ESPN.

Monday, April 27, 2009

Slaughterhouse 90210

It's a new week and time to have fun. Here's a funny new blog called Slaughterhouse 90210. It consists of a funny scene from a popcorn sitcom, like How I Met Your Mother, and a very serious literary quote also describing the situation. What can I say, it just works. :)

Sunday, April 26, 2009

Stealing Home

Stealing home is the most exciting play in baseball. I once saw Omar Visquel do this live, it was unbelievable. Ellsbury did it tonight against the Yanks.

Sidenote: I have a huge soft place in my heart for the Sox. I was in Boston on business the whole week they came back 3-0 against the Yankees. The whole city was on fire and I got to watch Game 7 at a Boston bar when they clinched. I swear I saw tears in grown men's eyes that night.

Double Sidenote: How cool is it that I can embed ESPN highlights into my blog?


I've had the pleasure of reading a couple great articles on the car industry lately. First is the The Road Ahead  by Peter Boyer. It's a meandering article through the history of the automotive industry and arrives at present day. Normally meandering is not a compliment, but so many of us are searching for context on what is going on in the industry today, and for context, it's usually helpful to turn to history. Boyer, who consistently writes great articles for the New Yorker, also contrasts the Automotive Industry with the Steel Industry. It's a great article that also includes a lot of deal making insights that got us here, and what it take the industry to survive.

After reading that article, I was pleasantly surprised to read the Businessweek article titled, GM: Some Bondholders Want Bankruptcy. Turns out many of the bondholders hold credit default swaps, which are basically insurance in case the company goes bankrupt. It's going to be very hard to cut a deal with those bond holders because they make more money in a bankruptcy. It's a prudent move for the bondholders to buy the credit swaps because it protects them from Government or Union hardball. Brilliant move by the creditors to protect themselves...

The situation is really interesting to me because the finance world finds itself intertwined with the political world. I can't wait to see how this places out.

Saturday, April 25, 2009

In Praise of Failure

Bruce Jenkins wrote his usual excellent sports column today . He writes for the Chronicle but writes about national issues for you living outside of the Bay Area. I chuckled out loud when I read this great excerpt:

"Who was the first guy to respond to a teammate's missed free throw by stepping into the lane and offering a high-five? Who launched this unbelievably lame trend? "Right on, man. Great miss. Keep that form, exactly. See if you can toss up another brick for us." ... "

Friday, April 24, 2009

Reblog: Why You Need To Demand Proper Medical Treatment

Excellent patient advocacy article written by Ben Munoz, my partner in Ben's Friends, a network of patient to patient support sites. For more on the networks, check out , , and

My favorite quote from his article:

"I had a emergency room physician, my family practioner, and my own neurosurgeon tell me I had the flu or a GI problem. Only my neurologist correctly diagnosed and treated me.

The truth is that although doctors are highly trained and very caring, they are overwhelmed by those needing attention. While I empathize with their lack of time, if you want proper treatment, you need to be the squeaky wheel who get the grease."

Friday Chill Music (April 24, 2009)

We had an epic heat wave in San Francisco this week but things have cooled off now. The fog has invaded the city and it feels like winter again. Oh how the City keeps us guessing.

I spent a lot of time listening to Shuffle on my iPod this week and I uncovered some old gems. Enjoy.

Hesitating Beauty - Jeff Tweedy  is from a live performance at the Rocky Mountain Folk Festival a few years back. It's just a nice soothing song, perfect for foggy San Francisco nights.

Wonderwall from Ryan Adams  comes from a show he played in 2000. It feels like the first time he ever covered the song in public. It's pretty epic. I love is quote at the end, "that's one I wish I had written...that's a pretty f***ing good song"

The Day Brings  is an old favorite from a Seattle band called Brad. I found it because Pearl Jam's Stone Gossard is in it, but the lead singer is Shawn Smith. He's pretty awesome and has a singing voice completely different than Eddie Vedder. They don't have much of a web presence anymore, which bums me out. I wish Brad would put out more records.

Finally, I'm a pretty big Josh Rouse, despite his extreme sensitivity. If you can stomach it, here is a pretty awesome acoustic version of Quiet Town.

Thursday, April 23, 2009

Inspirational Videos

I'm a sucker for inspirational videos. I found this excellent biking video via James Siminoff's blog

And if you thought that was inspirational, check out this video I made with my new Flip Camera. The flip is pretty awesome and I'm just learning how to use it. Just thinking about this video nearly brings a tear to my eye.

Wednesday, April 22, 2009

False Profits

Great article in the NY Times on the huge profit numbers the banks have been posting over the last week . In a nutshell, when a bank's bonds go down in price, they're allowed to book a paper profit on the net reduction in price because they could theoretically buy them back at a reduced rate from where they were issued. The catch is that they are allowed to book this profit, even when they don't actually buy the bonds back.

The NY Times singles out Citigroup, but this is true for all of them. Great quote:

Meredith A. Whitney, a prominent research analyst, said in a recent report that what banks were doing amounted to a “great whitewash.” The industry’s goal — and one that some policy makers share — is to create the impression that banks are stabilizing so private investors will invest in them, minimizing the need for additional taxpayer money, she said.

Song for a Heat Wave

The warm weather in San Francisco continues so I thought I would post one of my favorite heat wave songs. You can feel the desperation in Tweedy's voice and lyrics. Such a great song.
Wilco - Poor Places

While we're at it, here's a great clip from the Wilco documentary, I'm Trying to Break Your Heart.

Monday, April 20, 2009

Razeghi & the Power of Scribd

A few months back one of my favorite Kellogg professors, Andrew Razeghi , wrote a great article on Innovating in a Recession . He sent me the article for a quick look and I offered to post if on Scribd, thereby making it easily viewable and indexable by Google. Here's the doc again:

Innovating Through Recession by Andrew Razeghi of Kellog School of Management
height="500" width="100%" > value="">    
   Publish at Scribd or explore others:                razeghi              Recession      

Last week he wrote me because that document has become something of an Internet sensation and has given his consulting, writing and speaking career a little boost. Here's the affect in his words:

Remember that article you posted on Scribd for me? It’s become quite a phenomenon…translated into a several languages and has led to all sorts of interesting things…among them, I was out East yesterday and I guy came up to me and said: In front of an audience of 100 people the guy says: “Your paper has helped save my business. I’m just glad to meet you.” Wow! That’s a career highlight for me…and it wouldn’t have happened had you not offered the idea to give that piece away.  

COST TO ME: one moment of inspiration followed by two nearly sleepless and obsessive days of research and writing


  • 20,000 views on Scribd

  • translated into several languages including Mandarin

  • re-printed and distributed in numerous trade magazines

  • has led to interviews by major media outlets including FORBES, BUSINESSWEEK, DELIVER, morning drive radio, etc.

  • has led to at least a dozen speaking engagements in the U.S., Asia, and South America

  • has helped to promote my back catalog (my books, HOPE and THE RIDDLE)

  • has led to consulting engagements

  • and, the highlight of course came last night when this guy - in the front row - raises his hand and says: "You've helped save my business."

Add this: my business consists of "consulting, speaking, training & development" (most of which many people would claim recessions wreak havoc upon) and we are set to have a spectacular year. CREATIVITY saves the day and will save us. I'm convinced innovation is the only way forward.

What is so remarkable to me is that the whole thing (the article) was a big experiment. It was an experiment in the power of ideas. My goal was to reach as many people as I could with the message of that paper as fast as I could -- as people have no time to waste in a crisis. Did it make sense from a marketing perspective for me? Sure. But the bigger point for me is ability to reach people with ideas - relevant ideas - is absolutely remarkable.

There you have it folks. A great idea and hard work by Professor Razeghi, combined with a boost in distribution through Scribd & Google, results in an unexpected career boost. I love the Internet.

Hot Humor

It's so unbearably hot in San Francisco, I thought we could all use a little humor...

Fleet Foxes

You need to listen to these guys pure and simple. I saw them in concert last week and it was nothing short of a religous experience. The lead singer is an amazing talent. By the end of the show, I was comparing him to Eddie Vedder in impact.

Queen Larbage did a great job of summarizing their performance at the Fillmore  and I'm All Ears weighed in on them at the Palace of Fine Arts .

After seeing them at the Fillmore, I swore I would never miss them again, so I'm going to check them out in Oakland on Tuesday night. Hope to see you there.

Your Protector - Fleet Foxes

Mykonos - Fleet Foxes

White Winter Hymnal - Fleet Foxes

Sunday, April 19, 2009

Hand Out Mentality

I was reading Paul Kedrosky's weekend links article and saw these two articles listed.

  1. It May Be Time for the Fed to Go Negative in NY Times 
  2. California Asks Feds to Back IOU's in Sac Bee 
What do these subjects have in common? They're symptoms of the unsustainable economic policy of the US. Everyone wants a painless solution to the recession. The NY Times article advocates a little trickery to make us spend our money faster. No consideration is given to whether we should spend money (instead of saving it). Nope, if we can just get the people spending more, the thinking goes, we'll come out of this recession. Damn the consequences.

California is one of the largest economies in the world. What are we doing asking the Federal Government for a hand out in the forms of credit guarantees? We're a bunch of big boys and girls and need to make some cuts. 

It's sad that our mentality has shifted so much. I'm saving my money and waiting for the "hand out mentality" to get washed out. Hopefully I'll make some prudent decisions at that point. When all the games are done being played and we actually face our problems, that will be the buying opportunity of a lifetime.

Saturday, April 18, 2009

Marketing in a Recession

"So, when the Depression hit, no one knew what would happen to consumer demand. Post did the predictable thing: it reined in expenses and cut back on advertising. But Kellogg doubled its ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Krispies. (Snap, Crackle, and Pop first appeared in the thirties.) By 1933, even as the economy cratered, Kellogg’s profits had risen almost thirty per cent and it had become what it remains today: the industry’s dominant player."

Friday, April 17, 2009

Friday Bonus Music (4/17/09)

Since it's a lovely Spring day, I thought we all deserved a little Friday Bonus Music.

The Real Oprah

Something tells me this isn't going to be a smooth ride for Oprah...
(Found on Anne Hubert's blog , which I found via Alex Bain )

Friday Chill Music (April 17, 2009)

Thanks for another great week at Kenny Kellogg. Before we get to the music, it's worth noting that the blog's traffic has spiked in the last month. Spiked is a relative term but Kenny K is consistently doing 80 to 100 page views a day, which is pretty cool. Recently, we've had a healthy dose of 150 view days. I've done some digging around to see what's different and I can't isolate anything. My only conclusion is that more of you, the Readers, are telling your friends about the blog. I really appreciate the audience and I hope more of you who blog, twitter, social network and even work online to create cool stuff, will benefit from a little extra attention in the form of a spotlight from the blog. You probably know this, but about 1/3 of the content is either comes from the readers or is about the readers. It's a really great feeling to get an email with a subject line, "Perfect for Kenny K" or "Have You Seen This?" Thanks for feeding me content, for living cool lives worth highlighting and for the daily attention.

Now to the music. First up is The Arcade Fire - Neighborhood #1 Tunnels, which I found on Molly Mundt's Blip.Fm. I've been playing with Blip.FM and it's really cool. The Arcade Fire infuses such energy into their music, it's irresistible. This song is a perfect example.  
I've just discovered the new  Doves album and that they will be playing at the Fillmore soon. Here is a cut called Jetstream that I liked. Check it out.

I'm on a mad  Yeah Yeah Yeah's kick right now. Dull Life is an awesome song. I can't wait for them to come to San Francisco.

In honor of Pearl Jam headlining the Outside Lands concert in San Francisco, we'll end with an old school video from MTV Unplugged. Oceans is one of my favorite PJ songs. These lyrics always get to me:

Waves roll in my thoughts
Hold tight the ring...
The sea will rise...
Please stand by the shore...
Oh, oh, oh, I will be...
I will be there once more...

Thursday, April 16, 2009

San Francisco Chronicle Embraces Blogging

I was checking out the San Francisco Chronicle's website  today when I noticed that a blog post by one of their writers was the third highest headline on the main page. For all the blog bashing that major newspapers have done over the last few years, they're finally starting to embrace it.

In this case, Bruce Jenkins put together a quick list of how he saw the Warriors players contributing next year . It was a quick blog post, but very informative and I enjoyed the post. Great to see that newspapers are focused on highlighting great content, regardless of the form. Next stop is highlighting other paper's writers...

Wednesday, April 15, 2009

Google & Twitter

Why Google wants to buy Twitter in one picture.

When a simple message from a Twitter user is popping up #1 on a search for a high profile musician (Jenny Lewis) and her concert at a high profile venue (The Fillmore), you know that Twitter is creating tremendous SEO value. And they are becoming a very disruptive force. This is happening throughout the Google Index right now.

Google knows this though, so the cynical part of me expects a few gentle algorithm tweaks that will push Twitter messages down the Page Rank stack. But that might not be enough. Hence the acquisition discussion.

Tuesday, April 14, 2009

Reblog: Himmelsblog

Loved this post from the Himmelsblog .

Pearl Jam at Outside Lands

Pearl Jam is playing Outside Lands this year! The concert poster proves it.

I loved this little video I found on the Outside Lands site . Really clever. Now that is marketing.

However, we need to get back to Pearl Jam. I hope they play Porch. It's one of their best songs, "Plugged". Here it is, old school, Unplugged-style.

Monday, April 13, 2009

Visas for Founders

Brilliant suggestion by Paul Graham that there should be a class of Visas for founders. I did a report on H1B Visas at Kellogg which made me realize how much folks in that class contribute to society and how ridiculous it is to limit their #. On a personal note, my buddy David Hegarty had to sweat out the visa process and my friend Jeremy Hudson is still sweating it out. These are really bright people. Is there any doubt RealWalm wouldn't live here if the visa process was easier?

Graham takes it a step further saying there should be 10,000 visas for startup founders. I love this idea because the biggest knock on immigration policies are that "they'll take away jobs from Americans already here." Well, if you are a Founder, you'll be creating jobs immediately. Great idea by Graham.

Sunday, April 12, 2009

Touring Berkeley

Had a great day Friday touring the CAL Berkeley campus with my niece and nephews. They're getting to be college age now and their parents wanted to get them a taste of college life. It was a beautiful day in Berkeley and I think the kids were impressed. The tour of libraries and a big lecture hall seemed to have the biggest impact on them. Like me back in the day, they were a little intimidated by Telegraph, but I assured them that they would get used to it in a couple of days. For those who doubt the impact of big time college sports on applicants, the kids were blown away when I took them into Haas Pavilion. My nephew would have committed right there on the spot if he could have.

Here's a funny picture I took of the kids in phone booths. Remember those? My stepdad pointed out that the kids probably had never seen one before, and he was right. Existential question: Where would Superman change these days?

Anyways, all-around great day in Berkeley. The campus represents itself very well.

Saturday, April 11, 2009

Just Cause

Friends of Kenny Kellogg

It's been a big week for friends of the Kenny Kellogg blog. There are some amazing entrepreneurs who read this blog and I'm fortunate to have their input into the things I write and some of the side projects I work on. Here's a quick recap.

Hollrr, a personal reccomendation collection service started by David Hegarty in his free time, was featured on Springwise . This is a big deal as Springwise is one of the top sites on the Internet for finding new, cool stuff.

Sugar Paper, owned and operated by the fabulous Chelsea Shukov, was recognized in the New York Times Editor Choice "Harbingers of Spring" column. Sugar Paper is the best stationary around. I use it and so should you.

Molly Mutt, the worlds coolest doggy duvet company in the world, was featured on People Magazine's Pet's page. I've learned a lot watching Molly promote her new line. She's a master at viral channels and it's paying off big time.

Jessica Kim's BabbaCo baby car seat covers won an award from Parent Tested Approved Media.

There are so many talented people who read this blog that are just waiting for their moment. One thing I've learned from the people featured here, is you can't wait for your moment. You have to make it happen yourself. Make it happen.

Friday, April 10, 2009

Friday Bonus Song (4/10/09)

Andrew Bird is one of my favorite artists to work to. The melodies are so soothing, and then he layers unique sounds on top. Here is a friday afternoon bonus song, Measuring Cups . I've always loved this song.

Friday Chill Music (4/10/09)

Another week in the books at Kenny Kellogg Headquarters. We're excited because there are two awesome shows coming up in June. First Neko Case early in the month, and then Wilco at the Greek Theater. I always enjoy "the Greek" because my freshman dorm is next door to it. Bowles Hall basically looks like a castle, and the amenities are about on par with the 15th century. The one bright spot is it's location. As a freshamn, my friends and I would buy "40's" and listen to the concert. Not too shabby for $1.99. :)

In honor of Wilco, our first song is Reservations. I told Corinna, the Queen of Larbage, that this song is a perfect example of Wilco's genius. Although this is the ultra-sensitive acoustic version. Here is another version with some instruments behind Jeff Tweedy.

Next up is another great song from Elvis Perkins called While You Were Sleeping. This guy is amazing. I'm so disapointed I missed him in concert a few weeks back. Don't make the same mistake I did...

I've been listening to a lot of Pearl Jam lately, and stumbled upon this awesome version of Betterman.

Finally, I'm a huge Counting Crows fan and I've been waking up to the their acoustic record they put out alongside their latest studio release. It features this song, Blues Run the Game, which is a cover of Jackson Frank. The Crow's are at their best here.
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Thursday, April 9, 2009


Stop what you are doing, and buy Pillars of the Earth by Ken Follett. It's a fantastic book that was reccomended to me for about a year by at least 10 people. It sat on my book shelf for 6 months (sorry Corynn) but I finally bought the audio book and I'm completely hooked.

There are swords, cathedrals, priests, lords, masons, sex, killing and people starving. And that is just in the first 3 chapters, which I completed yesterday after sitting in my car for 30 minutes after reaching my destination, just so I could hear what was going to happen next.

It's a page turner, people. Get it.

Wednesday, April 8, 2009

A Softer World

I just discovered this cool comic strip/photo essay called A Softer World  via Rachel's blog. It's subversive, edgy, cool and feels a little like a guilty pleasure. I love the aesthetic and the message is refreshing. Enjoy.

Tuesday, April 7, 2009

"Their Problem is Us"

I've been writing about newspapers a lot lately. My position is that I think a new breed of news orgs are going to pop up in their place. There is almost an unlimited amount of knowledgeable people out there, willing to contribute their thoughts and insights. They'll make money in different ways, but probably not directly from journalism. And Google will help us find them. That's a very important thing that most traditional journalists don't realize, yet.

I love this extended quote from Fred Wilson in response to Murdoch's recent comments.

"News Corp can easily block Google from crawling its pages at the WSJ, NY Post, and elsewhere. They can also sue Google and litigate for a rev share or whatever else it is that Rupert wants from Google.
But here's the thing. Google is distribution. It is the newsstand. If Rupert or any other newspaper owner chooses to take its content out of the Google index, there will be plenty of content left that can take its place.
Google is not News Corp's problem. Their problem is us. We know a lot. But we don't own a printing press. And that's a good thing. Because printing presses are expensive. But we do own a computer and many blogging services are free. The explosion of "user generated content" has created some very compelling news services in all sorts of verticals. Not just tech, but finance, fashion, music, travel, lifestyle, and on and on. And there are a bunch of companies like Seeking Alpha that are aggregating up the best user generated content in verticals and creating awesome news, information, and entertainment services." -- Fred Wilson, You Can't The Newspaper Out of the Stand 

People are going to continue to self organize into little groups of Readers & Contributors. Seeking Alpha is just that, Ben's Friends (patient to patient support networks) is another flavor of that. At first, the pure journalism will be a trickle, but once people figure out they have a captive distribution channel that also happens to be free, journalists will gravitate to these networks. The smart ones will do it and figure out how to make money later. They already are.

Monday, April 6, 2009

She's Got a Way

The amazing weekend in Marin for the Schweifler wedding has left Kenny Kellogg headquarters a little disorganized. We'll be back up and running tonight.

In the mean time, enjoy this Billy Joel song, She's Got a Way. Aaron & crew taped the lyrics under every chair and to everyone's surprise, he led the entire 175 person wedding in a serenade of Ananda.

Not a dry eye in the house.

Friday, April 3, 2009

Friday Chill Music (April 3, 2009)

It's the Schweifler wedding this weekend and I'll be giving a kick ass best mans speech. I can't wait.

The Schweiflers decided to crowdsource their wedding music. They had each person invited submit a fast and slow song, compiled the list, and it will be playing at the wedding in Marin. I think it's a great call. In honor of Aaron & Ananda Schweifler, here's a sneak peak at 3 of the songs on their wedding playlist.

Willie Nelson's You Were Always On My Mind (with Johnny Cash in this version). Note, if you area big Jim James, M. Ward & Conor Oberst fan, you'll love this version  too.

Bryan Adams' Heaven . Click in the player in the upper right area. BTW - I freaking love this song.

And finally, Crazy by Patsy Cline.

Another awesome song. As a bonus, here is Crazy covered by Norah Jones.

That's it from Kenny Kellogg Headquarters. It will be a great wedding.

Thursday, April 2, 2009

Should I Be Worried?

Umm, this makes me nervous and excited at the same time . I'm definitely worried though.

Reblog: Slap Project

Reblogging Greg Mercer's entry on his Field Access blog. This video is done by the guy who runs, one of my favorite photo sites. Greg describes the video well:

"Nick has been on a tear lately and consistently has awesome photography, motion graphics, videocasts, and tutorials up on his site. This is one of a few slow motion videos he and his coworkers at Digital Kitchen shot with a camera that captures 1000 frames per second.  Check out the others that he posted on his blog as well.  Great stuff."

Slap Project from Nick Campbell on Vimeo.

Wednesday, April 1, 2009

"We Had No Risk Management"

Great article in New York Magazine by Michael Osinski about his role in the the debt bust. He built computer models that projected how bundles of mortgages would perform, creating a false sense of security across Wall Street. Trading these instruments was so lucrative that everyone had to get in on the game, and to get in on the game, you had to buy his software. He made a lot of money, as many on (and off) Wall Street did.

I loved the article as a stand-alone piece, but I especially loved this quote:

The economy improved. The Feds raised rates. Kidder was in trouble. We had no risk management. According to an internal report, there were management deficiencies across the board. If I remember correctly, one top executive had a contract stipulating that he would only work one day a week for his seven-figure wage. So Kidder was in bad shape when it was hit by the scandal involving the infamous Joseph Jett, who allegedly fabricated hundreds of millions of dollars in trades, more or less taking down the whole firm. Back then, a major Wall Street failure didn’t panic the entire country. Kidder may have handled a fifth of the country’s mortgage-backed securities, but in the wake of its demise, the American economy did not wither. Though securitization slowed to a crawl, breadlines weren’t forming. Homeowners made their payments. Bonuses, if you got one, were halved. People stood pat.

The passage on Kidder's risk management structure struck a cord in my academic experience. In 1998, I was in Finance classes at CAL. I love Finance because it combines math, business and human pyschology. I'm fascinated by how our base human instincts are reflexed in markets, and I was lucky to be learning about it at one of the best undergraduate programs in the country.

My Financial Markets class was TA-ed by an older guy, probably 30 to 35. Most TA's are in their mid-20's. It was a small class and pretty dorky stuff, so if you were in this class, you loved Finance. One day towards the end of the semester he asked us if we wanted to know why he was such an old TA. We nodded and he launched into his story about how he had been one of the risk modelers on mortgage backed securities at a place called Kidder Peabody. He had built elaborate models and was confident in their ability to forecast prepayment risk and duration, the two most important variables in mortgage backed security prices. But his bosses got involved because the models were tying their hands too much. A tweak here, an adjustment there and a year later, Kidder Peabody was bankrupt because of mortgage backed security losses.

The TA's anger was palpable. He was so disgusted with his bosses that he decided to go into academia. This story was probably the most important thing I heard all semester. It cemented my appreciation for risk in financial markets, for career risk if you didn't stand up to your bosses, and it taught me there was no free lunch. I avoided the entire debt meltdown because when Greenspan started artificially pushing down rates and the public reacted by reaching for higher priced houses at variable interest rates on interest only loans, I knew what would eventually happen. That story was worth the price of my education, and this article reminded me of it one more time.

(Note: Not an April's Fools Joke)